Spiking gas prices: sometimes it really is a conspiracy
The way prices rise may appear suspicious but nothing prevents competitors from following each other
This is the part where some incredibly intelligent economist usually tells you that while it may look suspicious the way gas prices rise in lockstep without any apparent logic except relieving you of your hard-earned pay, in fact, it does make perfect sense to anyone who's spent half their life in graduate school studying the highly evolved calculus of taxes, rack rate fluctuation and Middle Eastern politics.
So with that out of the way — what if they're wrong? What if it really is a conspiracy?
As prices in Vancouver hit $1.50 a litre this week, it's certainly tempting to go down that road. And — in fact — history shows that price-fixing at the pumps has happened in Canada. Recently.
But there's a big difference between the legal definition of price-fixing (the kind that can get a vendor jail time) and what a cash-strapped customer might consider the crossing of a moral line in a bid to keep up with competitors.
"I think a lot of Canadians they look and they go, 'I can't understand why these companies are appearing to raise their price in lockstep," says Steve Szentesi, a Toronto-based competition and advertising lawyer.
"I think that's at the root of it all. And I think there likely is some pessimism around large corporations that are controlling a staple like gas. There's probably an innate pessimism assuming that they're doing bad things. Sometimes, they are."
Free versus fixed markets
If you are a conspiracy theorist on the gas price front, you're not alone.
According to the results of an Ipsos Public Affairs survey done last October as part of a study on retail fuel pricing in Ontario, the "vast majority" of drivers had negative impressions of the fuel industry.
"Nearly 90 per cent felt that the industry manipulates prices for profit (such as during holiday weekends)," reads the report, prepared by the Kent Group. "And 53 per cent believe that a lack of competition is leading to unfairly high prices."
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The legal basics of price fixing require a finding that two or more competitors have agreed to either fix prices, restrict output or divide or allocate markets or customers.
Szentesi says that's a very different thing to hiking your price to match a competitor's.
"Raising your price unilaterally to get the most you can get is natural free market conduct," he says. "What you can't do is enter into an agreement with a competitor."
Wiretaps, schemes, conspiracies
The Competition Bureau of Canada says questions about gas price fixing are among those most frequently asked of the agency.
It dedicates a page of its website to successful gas price prosecutions the bureau has pursued involving dozens of individuals and corporate entities in Ontario and Quebec.
The cases have seen courts levy millions of dollars in fines. And some of the conspirators have been sent to jail.
In one investigation, the bureau used wiretaps to intercept more than 220,000 private communications between dozens of people.
The details of the scheme are laid out in a Quebec Court of Appeal ruling which includes a document outlining the way in which a representative of a fuel company would call employees of a major service station chain to get an agreement on price and time before calling people at other service stations so that they would agree to do the same.
"Once the price hike was initiated, the conspiracy participants would call each other to check whether the price modification had taken place as agreed," the document reads.
'Everybody needs to buy gas'
Beyond the criminal courts, gas price fixing has also led to class action lawsuits on behalf of cheated consumers.
In 2016, an Ontario court ordered four companies — Canadian Tire, Mr. Gas, Suncor Energy Products and Pioneer — to pay out $1.3 million to residents who bought gas in the Kingston, Belleville and Brockville area between May and November of 2007.
The class action award per individual amounted to around $20. That's actually a lot of money when you consider the fact prices were fixed by mere cents.
Linda Visser, a partner at Siskinds, the firm which won the suit, says some non-profit organizations actively sought consumers to assign their claims to them so the money could be used for charitable purposes.
She says gas prices touch a unique nerve with the public.
"Partly, it's because the prices are so easy to compare, so people can see they're all charging the same amount. And because prices are so variable," she says.
"The other thing is that everybody needs to buy gas."
'Please Don't Buy Our Gas'
Desperation and dismay are nothing new at the pumps.
Neither is a sense of impotency in the face of seemingly random price hikes that companies claim make complete sense — if only you could understand them.
Perhaps one of the most unusual ways to fight back is detailed in a slim 1977 B.C. Supreme Court ruling.
The manager of a service station leased from Gulf Oil complained that the company was forcing the price of gasoline too high in 1976. The oil giant sought to have him evicted because of the way he responded.
"Many of my customers complained to me directly about the increased price of gasoline and also accused me of setting the price of gasoline and I was also accused of 'ripping them off," the man alleged.
He fought back by posting handwritten signs on the top of two gas pumps.
They read "Please Help Us Fight High Gas Prices, Please Don't Buy Our Gas — The Management."
According to the judgment, at least two members of the public bought gas there anyway.